All businesses must produce accounts at the end of year to show how much profit or loss they have made. These accounts are known as final accounts.
Different types of business produce their accounts for different purposes. A sole trader with a small business and employing no one may produce simple accounts so that he or she can report their earning to the tax authorities for income tax purposes. A private or public limited company must produce more complex accounts for both tax purposes and to send to shareholders.
Accounts are used in planning and controlling the activities of a business. They provide a measure of the success of a business in achieving its financial objectives. It is the role of the accounting function to gather financial information about the activities and performance of the business and to prepare, interpret and analyze the accounts. We look in detail at interpreting and analyzing accounts in unit 13.
